Market Strategy

The case about Encyclopedia Britannica lays out the trials and tribulations of the company starting from the initial success of the Encyclopedia to the emergence of the PC, the entry of Encarta and the eventual downfall of Britannica. After reading the case I would state that Joe Esposito could have saved Britannica.

In the first half of the case we can see some clear issues that Britannica was faced with. First, the encyclopedia was distributed through a traditional sales channel that relied heavily on its sales staff and on existing leads. This meant that the company’s supply chain wasn’t efficient and it had to spend a big portion of its revenue on commissions (25-40% of sales based on the final sales price). Moreover, the company was so wedded to its traditional sales model that even though it was exploring other entry opportunities it wasn’t ready to cut back on its sales staff and didn’t want to cannibalize sales of this channel. Second, the product itself, in my opinion, was pricey and targeted institutions and parents. As mentioned in the case, “the total revenues from sales to institutions had never been large in comparison to home sales”. We can surmise that if a barebone encyclopedia came along that fulfilled some of the basic needs for kids then that would be an ideal product for parents and the company could experience market share loss in this segment. Furthermore, even in the face of competition the company didn’t lower the price of its product or try to create “lite” version until it was forced to do so. Third, the product itself wasn’t refreshed at a fast enough pace and sometimes revisions were years into the making. As such, a competing product that could be updated dynamically would be ideal. Consumers even had to subscribe to an Encarta magazine to get any updates that occurred between revisions. This meant that even though the content of Britannica was great it wasn’t a very usable product. Given the growth of the encyclopedia, Britannica must be spending a lot of resources to research, updated and reprint the entire encyclopedia. Therefore, it should have grasped the revolution that was the PC.

The most astonishing fact about the case was that Britannica had the means to succeed. It knew that change was coming and had created the Advanced Technology Group (ATG) to enable it to position for change. However, ATG’s mission to put the entire Britannica online was a flawed one as it didn’t accommodate the current generation of the PC. It was indeed ahead of its time and its approach wasn’t customer centric. If the ATG’s mandate was to create a product that could accommodate the new media PC and its home customers then the final product would have been quite different. We can observe parallels of this today when companies adopt a mobile first approach to their products. In contrast, Encarta’s success can be attributed to the fact that it followed an emergent strategy. It really didn’t have a core product yet and wasn’t wedded to any preconceived notions. Encarta followed an evolving approach where it tested the initial barebones encyclopedia and continued to improve the product iteratively.